Make no mistake. This wheat market is all about Russia.
The month of May (to date) has seen CBOT rally 17% or nearly 90USc/bu as first dryness in the Russian south (Caucuses) region and then a series of frosts through the Central regions, took a bite out production forecasts. It has wiped about 8mmt off the previous season’s total of 93mmt to now being (officially) 85mmt. The range of estimates is somewhere between 80-85mmt. The forecast over the next couple of weeks remains dry, leaving the market guessing whether there will be more cuts.
Neighbouring Ukraine is also seeing moisture deficits build and it is likely that further production cuts will eventuate. The current wheat forecast is for 21mmt – compared to the 5 year average of 26mmt.
The sharp rally on CBOT shook the resolve of many of the speculative/managed money traders who have quit their sold positions. The net short (sold) positions in CBOT have fallen from 96k contracts in mid April to now being around 28k, making it the least bearish outlook since Oct ’22 (according to @kannbwx).
In complete contrast – and perhaps keeping a lid on the wheat rally – conditions in the US and Canada are excellent. The annual crop tours across the US revealed above average yield prospects. Kansas estimate came back at 46.5bu/ac (3.1t/ha) vs the longer term average of 42.4bu/ac (2.83t/ha).
Somewhat surprisingly, the USDA lowered the overall US winter wheat condition score by 1% to 49% good to excellent, but also noted that the total area in drought was significantly reduced. The recent rainfall has caused a few headaches by delaying seeding of corn, beans and some spring wheat, but overall, the 70% of crop that is in the ground, is enjoying ideal conditions.
Weather remains in the driving seat in terms of price direction. The Black Sea originates some 30% of the world’s wheat and is therefore critical to overall supply. While Russian production is being cut, current estimates are still above the five-year average and carry over stocks are believed to be at record levels. Export pace out of the Black Sea is not likely to diminish too much at this point in time but any further cuts to production will have the effect of lifting the floor price higher.
Next week
The wheat market started to glance at the dry conditions being experienced in WA and SA. A rain next week would be welcome for growers but also the market that is staring at uncomfortably tight global stocks to use at 13.5%..
The United States Department of Agriculture is forecasting a record soybean crop in the US, as large plantings and good growing conditions continue to see
Having briefly flirted with prices below 500c/bu, the CBOT Dec ’24 contract is relatively unchanged week on week after some minor adjustments were made to
While growers don’t like to see wheat prices making new milestones to the downside, for consumers it can create opportunities. This is when grain consumers
Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.
From Russia, with love again
Neighbouring Ukraine is also seeing moisture deficits build and it is likely that further production cuts will eventuate. The current wheat forecast is for 21mmt – compared to the 5 year average of 26mmt. The sharp rally on CBOT shook the resolve of many of the speculative/managed money traders who have quit their sold positions. The net short (sold) positions in CBOT have fallen from 96k contracts in mid April to now being around 28k, making it the least bearish outlook since Oct ’22 (according to @kannbwx).
In complete contrast – and perhaps keeping a lid on the wheat rally – conditions in the US and Canada are excellent. The annual crop tours across the US revealed above average yield prospects. Kansas estimate came back at 46.5bu/ac (3.1t/ha) vs the longer term average of 42.4bu/ac (2.83t/ha).
Somewhat surprisingly, the USDA lowered the overall US winter wheat condition score by 1% to 49% good to excellent, but also noted that the total area in drought was significantly reduced. The recent rainfall has caused a few headaches by delaying seeding of corn, beans and some spring wheat, but overall, the 70% of crop that is in the ground, is enjoying ideal conditions.
Weather remains in the driving seat in terms of price direction. The Black Sea originates some 30% of the world’s wheat and is therefore critical to overall supply. While Russian production is being cut, current estimates are still above the five-year average and carry over stocks are believed to be at record levels. Export pace out of the Black Sea is not likely to diminish too much at this point in time but any further cuts to production will have the effect of lifting the floor price higher.
Next week
The wheat market started to glance at the dry conditions being experienced in WA and SA. A rain next week would be welcome for growers but also the market that is staring at uncomfortably tight global stocks to use at 13.5%..
Have any questions or comments?
Click on graph to expand
Data sources: SovEcon, USDA, Reuters, Rabobank, Next Level Grain Marketing, Mecardo
Categories
Have any questions or comments?
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
China’s canola curve ball
The wheat market has enjoyed something of a bounce this week. Having briefly touched multi-year lows of 525c/bu for the Dec ’24 contract last week,
Canola resisting the big soybean crop
The United States Department of Agriculture is forecasting a record soybean crop in the US, as large plantings and good growing conditions continue to see
Harvest quality plagues wheat
Having briefly flirted with prices below 500c/bu, the CBOT Dec ’24 contract is relatively unchanged week on week after some minor adjustments were made to
Wheat price management
While growers don’t like to see wheat prices making new milestones to the downside, for consumers it can create opportunities. This is when grain consumers
Want market insights delivered straight to your inbox?
Sign up to the mailing list to get regular updates to new analysis and market outlooks
Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
Research: Analysis of the Australian sheep flock
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.